Rich vs Wealthy: Uncovering the True Meaning of Wealth

If you’re rich and make a lot of money, does that automatically make you wealthy?

Doctors typically make a lot of money so all doctors are rich, right? 

These are some of the topics we’re going to cover today. 

If you’re a subscriber to this blog (thank you), then you’ve noticed that I’ve frequently referenced one of the most influential financial books out there…Robert Kiyosaki’s Rich Dad Poor Dad (AKA The Purple Bible). 

One of the first concepts he discusses in the book has to do with the main difference between being rich or being a wealthy individual. (Rich vs Wealthy)

Growing up, I thought that if a person was rich then they were also wealthy.

Maybe you did too?

But it seems, according to Kiyosaki, that this isn’t the case.

He states that the rich make lots of money, but the wealthy don’t worry about money.

Ok, I realize that you now be a bit confused. So let’s break this down for you.

What Does Being Rich Mean?

The best way I know of how to describe this is by highlighting your typical high income earning professional (MD, DDS, lawyer, etc).

You should know that income is the main way that wealth is created.

But income by itself does NOT equal wealth. (income does not = wealth)

Someone that’s considered rich simply means that they make a lot of money each year yet have little to no assets to show for it.


A perfect example would be a professional athlete.

They may make $8 million a year but spend $8.5 million on a flashy lifestyle. The mansion and the Bentley in the driveway are nice, but what happens if they’re injured or their time in the league is up?

What then?

How do they keep paying all of their bills?

They’re rich while they’re competing but MOST go broke when they’re not.

What about doctors?

Let’s a look at the typical physician. They may take home $350,000 a year but what if they have a $350,000 a year lifestyle as well?

This person would be better off making only $80,000 a year and saving half of it!

This is a great teaching point to pass along to your kids. Just because someone drives fancy cars or lives in a million dollar home, doesn’t necessarily mean they’re wealthy.

The rat race

In short if you’re rich, you’ve got a high paying job that supports your participation in the Rat Race. What this means is that even though you may NOT want to get up each morning and go to work, you HAVE to as you’re relying on ONE income source to pay expenses. 

That’s the problem with a rich person. They have to continue to work in order to “look” the part. 

I feel that most rich people “think” they’re wealthy. Even though they make lots of money to spend, they have no real financial freedom.

Being wealthy means you don’t have these worries.

Remember that Kiyosaki said, “The rich have lots of money, but the wealthy don’t worry about money.”

I want you to reread that statement and let it really sink in.

The wealthy don’t worry about money.

That’s the important distinction between the rich vs wealthy.

What Does Being Wealthy Mean?

Someone that’s wealthy (as opposed to being rich), is able to live off of assets that pay passive income whether they’re working or not. 

Basically the wealthy focus on accumulating assets that provide multiple income streams for freedom whereas the rich focus on purchasing liabilities that support their lifestyle.

Assets are investments such as real estate, stocks, or a business which creates portfolio and passive income.

Many times financial professionals will use net worth as a measure of wealth.

This is calculated by subtracting your assets (what you own) from your liabilities (what you owe).

Assets – Liabilities = Net Worth

What is Rich Dad’s definition of wealth?

Robert Kiyosaki defines wealth through an equation he learned while studying  under one of the true American geniuses, R. Buckminster Fuller.

Fuller defined wealthy as: “A person’s ability to survive X number of days forward.”

Turning this into a question, he would ask, “How many days could you survive if you stopped working today? How long could you survive on the amount of money you have?”

It’s that simple.

Let’s take a look at Dr. E. His personal monthly expenses are $10,000 and he has $40,000 in savings. Using the formula above, his wealth is roughly 4 months or 120 days. 

But if he had streams of income producing $10,000 a month flowing in, then his wealth would be infinite.

True wealth is measured in time, not dollars.

Looks Can Be Deceiving: Rich vs Wealthy

Now you should understand that just because someone is rich, doesn’t necessarily mean they’re wealthy.

Also, just because someone is wealthy, doesn’t necessarily mean that they appear “rich”.

Social media has done a great job of teaching us what it supposedly is meant for someone to be rich as you MUST have:

  • expensive cars
  • a big house
  • bling jewelry
  • fancy clothes

Doctors are a perfect example of high income professionals that are known for falling victim to lifestyle creep and spend money as fast as they make it.

As long as the paychecks are coming in, all things are good… but what happens if they stop temporarily or permanently?

The being “rich” can disappear fast.

But what about the wealthy?

How many wealthy people do you know that don’t appear rich?

The Millionaire Next Door

If you’ve read The Millionaire Next Door then you know that the “average” wealthy person they interviewed have enough money to buy luxury items but most don’t.

The majority live below their means, wear older clothes, drive used cars, send their kids to public schools and live in modest homes. 

They practice stealth wealth which describes those who don’t appear to be rich, but have a high net worth.

This book was full of people that were interviewed that spent their entire lives delaying immediate gratification to create long-term financial security.

These wealthy people focused more on growing their wealth to achieve the ultimate goal of creating more options in their lives; by not spending on the things they don’t value.

My thoughts

Not I understand that this is impressive and a great way to live, it’s NOT how I now choose to live though.

After reading this book and becoming a student of financial education early on, I thought that in order to obtain wealth, living like “The Millionaire Next Door” was the only way.

Now that I’ve learned how to create passive income to replace monthly expenses, I choose NOT to spend my entire career in only one profession, investing in the stock market and hoping for 7-8% returns that’ll allow me to someday retire without running out of money.

I want options as soon as possible to have the ability for early retirement, career change, or whatever interests me at that point in time.

Living like the “average millionaire” doesn’t give me those options. But it’s still a MUCH better way to live than the typical “rich-appearing” individual.

An Example – Rich vs Wealthy

I understand that having lots of money is fantastic putting you in a position to buy nice things for people and take your family on cool trips, but I believe not having to worry about money is even better.

After I read Rich Dad Poor Dad, I continued to research those that are rich vs wealthy and what I found is that there is a difference between the two.

The simple difference is that a wealthy person has sustainable wealth even if they aren’t working whereas someone who’s rich will only be that way for a short period of time until the money runs out.

To put this concept in perspective, let’s take a look at Dr. Mark and Dr. Gary.

Dr. Mark – Oral Surgeon

Dr. Mark is a 43 y/o self-employed oral surgeon making $375,000 a year and like most doctors, relies 100%  on his active income.

If his hands aren’t working, wisdom teeth aren’t coming out!

By most people’s standards, Dr. Mark is considered a rich person.

He’s married with two kids in private school, lives in a nice neighborhood, golfs 2x a week at the local country club, and takes 2-3 expensive trips a year with his family.

Clearly he has plenty of money at his disposal to fund his lifestyle and look the part of a successful surgeon at this point of his career.

He has expenses like you and me.

Dr. Mark’s expenses

  • $900K mortgage
  • leases two luxury cars
  • private school tuition
  • country club dues

Also, he pays both for his family and staff’s health insurance and let’s don’t forget about those taxes.

Now when you subtract these expenses from his annual income, then remove his 401k and college savings for his kids and the little investments he makes here and there, Dr. Mark isn’t left with much.

After taxes, he takes home $245,000 a year or $20,416 and monthly expenses total $18,500.

That doesn’t leave him much room for a cushion. He’s literally working paycheck to paycheck making $375K per year.

Sound familiar?

Golden handcuffs

Good ole Dr. Mark has got on a nice pair of golden handcuffs as what other career can he do that will allow him to continue his lifestyle and pay his debts?

Since wealth is defined as the ability to continue living, enjoying life and paying your bills while you not having to work, here’s a question.

What happens if Dr. Mark wants to take off a couple of months during the summer and travel with his kids or becomes injured and can’t work for an extended period of time?

How long do you think he could continue paying all of his expenses?  3 or 4 months tops, right?

What this means is that Dr. Mark is rich but he’s NOT wealthy.

Dr. Gary

Now, let’s shift gears and take a look at an example of a wealthy person.

Kiyosaki said that while the rich have lots of money, the wealthy don’t really have to worry about money.

Next up is Dr. Gary.

He’s a 47 year old married pediatrician, with 3 kids making $275,000 a year in a group practice in Montana. 

Even though he makes less than Dr. Mark (100K a year less), he’s considered wealthy. Dr. Gary’s dad was a professor at a state school and taught him to begin saving early and to live below his means.

Shortly after medical school, Dr. Gary joined the Navy which not only paid for his medical school, but also his undergraduate tuition. He entered private practice with zero student loan debt, bought a modest home in a middle class neighborhood, and all of his kids attend the local public school.

Ever since his first year in practice, he has contributed to his practice’s 401k but also began learning from Robert Kiyosaki about the difference between assets, which put money in your pocket, and liabilities which take money OUT of your pockets.

He also learned that being wealthy meant being financially free (wealth = freedom). He didn’t like the idea of making six figures yet living paycheck to paycheck like many of his colleagues currently do.

apartment building blue sky fluffy clouds

His main focus is on investing in at least one (sometimes 2) passive real estate syndication deals which he’s currently in 13 and plans on adding 2 more this year.

His goal is to continue building multiple streams of passive income from his assets that will allow him to retire early yet maintain his current lifestyle for this rest of his life.

What this means is that his passive income will pay for him to take his kids to Destin for a nice beach vacation for a month while they’re out of school for the summer.

Are You Rich Or Wealthy?

Now that you know the difference between the two, do you consider yourself  rich or wealthy?

I understand that a high salary can make you appear wealthy, but it takes commitment and sacrifice to attain real wealth.

To take it a step further, I firmly believe that YOU can build sustainable wealth through real estate. The cool thing is that you can create your own strategy to fit your personality.

For instance, if you want to start small and become an active investor, then purchasing a single family home or duplex might be the best fit.

If you’re busy and don’t want to deal with tenants (like me), then passive investing in real estate syndications would work best.

With real estate, not only do you benefit from appreciation and cash flow, you also get some of the best tax advantages that the IRS allows such as depreciation.

So if you’ve been thinking about how you can attain financial freedom in terms of working more hours or possessing more skills, think again. It’s going to take a mindset shift to get you thinking of wealth in terms of money that’s being generated for you while you’re doing other things.

Once you realize that there’s a limit on how many workable hours there are then you can start the process of focusing on investing in assets that produce passive income.

Remember, being wealthy means you don’t have to go through life always trading time for dollars to survive.

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